RIYADH, 9 August — Foreign investors can now own property in Saudi Arabia, sponsor their own employees and enjoy 100 percent ownership of the projects they set up in the Kingdom.
They do not need Saudi sponsors and they will enjoy the right to repatriation of their entire profits. Besides, foreign investors will have access to all facilities available to their Saudi counterparts.
These are some of the new incentives contained in the by-laws for foreign investment approved by the directors of the Saudi Arabian General Investment Authority (SAGIA) yesterday.
Announcing the new strategy to attract foreign investment, SAGIA Governor Prince Abdullah ibn Faisal ibn Turki said the executive by-laws include 23 articles which deal with fields of investment, conditions and terms for licensing as well as acts that constitute a violation of the law.
Expansion of existing projects with fresh capital injection is another salient feature of the by-laws.
In other inducements for investors, corporate tax has been reduced from 45 to 30 percent. They will also enjoy tax holiday.
Under the by-laws, all areas have been thrown open to foreign investment except those declared off-limit. To this end, a special committee will review the fields exempted from foreign investment and submit its report to the SAGIA board for its decision.
The promulgation of the by-laws comes at a time when the Sept. 11 events have cast a shadow on the investment climate. Also, other Gulf states have liberalized their investment regime in the race for attracting overseas capital. With 100 percent equity participation allowed, the new regulations could pave the way for overseas investment to promote import substitution.
Yesterday’s announcement came after the SAGIA governor contacted foreign missions in the Kingdom for their comments on the economic reforms and what more needs to be done to stimulate overseas investments in the Kingdom.
Saudi Arabia attracted the highest level of foreign investment in the Arab world last year — $4.8 billion, or 54.7 percent of the total investment in the region.
According to a study conducted by the "Saudi Economic Bulletin", a monthly publication of the Saudi British Bank, overseas investments in the Arab world constituted only one percent of the total foreign investment in the world. Licensing and visa hurdles, sponsorship rules, taxation regime and a host of other regulations had a negative impact on potential investors who were waiting for the approval of the investment laws.
Since its inception in April 2000, SAGIA has issued licenses for various projects valued at SR42.5 billion ($11.3 billion). The most recent were three industrial licenses for a major petrochemical project to be set up in Jubail by a newly established Saudi-US joint venture, Jubail Chevron Philips. The project, worth SR3.776 billion, also includes expansion of the group’s existing facility in Jubail. The three licenses were for the production of ethylene, ethyl benzene and styrene.
The launch of the new Saudi-US joint venture coincided with the April visit of Prince Abdullah, the regent, to the United States for talks with President George W. Bush.
Noting that the license for the industrial project was issued in just six hours, the SAGIA chief said the capital for the new project would be raised through floatation of shares valued at SR1.2 billion (about $ 320 million) and the balance through a low-interest loan from the Saudi Industrial Development Fund.
Indian Embassy sources said SAGIA has approved around 30 Indian projects, including 14 industrial and 16 non-industrial projects worth SR1.207 billion, in different sectors such as petrochemicals, management and consultancy, construction, telecommunications, IT and software development, designing, financial services and pharmaceuticals. Currently, 37 Saudi-Indian joint ventures are in operation.
Aside from the petrochemical sector, investment opportunities abound in the power sector. According to a study conducted by AlBank AlSaudi AlFransi, the Kingdom’s power sector would need for the next 23 years an investment of $115 billion for setting up new plants. Power consumption has been growing annually at the rate of 5.5 percent, with the total number of electricity subscribers at around 3.5 million.
France and Italy have also expressed interest in investing in the Kingdom. France is exploring investment opportunities in the power, desalination and transportation sectors, while Italy has identified the scope in the jewelry sector. Around SR64 million worth of Italian jewelry is imported into the Kingdom annually.
One of the sticking points yet to be addressed is the areas declared off-limit to overseas investors. However, SAGIA has declared that any such decision could be taken only by the Supreme Economic Council headed by Prince Abdullah.
